Mortgage Compliance

MERS Compliance: Reducing Risk with Well-Documented Procedures

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Most independent annual reviews of 2019 MERS® compliance are now concluded and our attention is now locked on managing this year’s responsibilities amid a global pandemic.  Last year, LoanLogics found, yet again, that inadequately documented procedures leading to misinformation and omissions remained a challenge for servicers.  This was even more pervasive as staffing changes occurred within an organization.  With 2020 feverishly testing the industry’s business continuity plans and affecting employment, it’s important stay focused on mitigating compliance risks, particularly when it comes to recurring problem areas.  

MERS Annual Report requirements state that an independent third-party vendor will attest that the MERS Member engaged them to monitor their performance against the MERS System Procedures for effectiveness.  Additionally, the requirements also clearly state Members must have written internal procedures in place that provide reasonable assurance that the Member:

  • Has submitted data for all required and conditional reporting fields
  • Is managing all reject/warning reports associated with registrations, transfers and status updates on the open-item aging reports
  • Is compliant with the requirements specified in the MERS System Rules of Membership and System Procedures Manual

Common problems that relate to MERS System Procedures can be categorized into three main buckets.

Outdated procedures

Here, Members fail to review the MERS System Procedures Manual for changes or updates as they relate to system release, regulatory/legal changes, and/or recorded document requirements.  Another scenario occurs when release notes or external system impact analysis documents for MERS® System changes are provided to the Global Address Listing (GAL) and required MERS system contacts at the organization but are not then forwarded to the responsible party or parties for review or implementation.   

Insufficient procedures

In addition to being outdated, procedures are considered insufficient when they’re non-specific to the tasks or transactions and the Member’s policies consist of mainly a copy and paste of the sections within the MERS System Procedures Manual.

Missing/Total Lack of procedures

Loss of MERS procedural knowledge due to staff or departmental changes is a big culprit here.  This will be particularly critical going forward in 2020 as organizations continue to make difficult decisions in eliminating positions to keep the organization profitable in uncertain times.

Furthermore, we tend to find that MERS procedures are not part of the corporate established documentation for compliance.  They are often maintained separately, which subjects them to being misplaced or deleted.  Non-centralized administration exacerbates this whereby departments act on their own accord without any general MERS oversight to ensure standardization across the organization.  

What process improvements can servicers deploy to solve for these systemic procedural problems?

  • Establish a centralized resource for reviewing all procedures and ensuring new requirements are addressed for all departments having MERS responsibilities.
  • Connect MERS processes with internal triggers and controls to ensure procedures reflect the full chain of action(s) from trigger to completion of the transaction or event.
  • Maintain complete MERS process and procedure documentation as part of the established corporate procedures.
  • Ensure that institutional knowledge is retained and reflected in the Member’s MERS Procedures documentation, so when organizational changes occur that knowledge does not leave with an employee.

In uncertain times, it’s even more imperative to have well established plans in place to help the company avoid exposure to non-compliance.  When it comes to annual MERS reviews, a trusted partner will not only advise their clients on areas of risk but provide solid actionable recommendations for steps to build a solid foundation.

To learn more about LoanLogics’ annual MERS review capabilities:

Listen to this podcast.

Download this white paper.

Read more of our MERS related blogs.

Request a discussion with a LoanLogics representative.  

Gary Vandeventer

About the Author

Gary Vandeventer

GARY VANDEVENTER has over 18 years of hands-on experience with the MERS® processes including participation in the original design of the MERS System. He is arguably the country’s pre-eminent expert on the policies and procedures within MERS. He is the Vice President, Loan Servicing Consulting at LoanLogics. Gary is a frequent panelist and speaker at industry conferences on the topic of MERS and its processes. Prior to joining LoanLogics, he held the position of Vice President, Product Division for MERSCORP Holdings, Inc. In that capacity, he oversaw the actions of the Membership, Integration, Quality Assurance & Training and Development departments.
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Gary Vandeventer

About Gary Vandeventer

GARY VANDEVENTER has over 18 years of hands-on experience with the MERS® processes including participation in the original design of the MERS System. He is arguably the country’s pre-eminent expert on the policies and procedures within MERS. He is the Vice President, Loan Servicing Consulting at LoanLogics. Gary is a frequent panelist and speaker at industry conferences on the topic of MERS and its processes. Prior to joining LoanLogics, he held the position of Vice President, Product Division for MERSCORP Holdings, Inc. In that capacity, he oversaw the actions of the Membership, Integration, Quality Assurance & Training and Development departments.
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